Having an efficient, on-time, and compliant payroll system is one of the most important aspects of keeping employees confident in their employer. When issues surrounding an employee’s payroll arise, they start to get worried. Payroll administration can be a complicated job when you’re focused on being compliant in one country. When you expand internationally into multiple markets, the complexities only deepen.
Complexities of International Payroll Administration
Every country has different regulations that complicate payroll administration. Every government around the world enforces their own version of labor rights for employees and obligations for employers. In order to navigate this treacherous landscape, employers need to understand:
- Tax laws
- Minimum holiday and vacation regulations, and how they affect salary
- Mandated bonus structures, such as 13th-month laws
- Required severance pay
Additionally, it’s important for payroll administrations to understand the cultural expectations in a region such as:
- Do employees in one country expect bonuses at certain times of the year?
- Is it common for countries to match retirement contributions, pay for childcare, or offer other additional benefits?
- How often do employees expect to get paid? Weekly, bi-weekly, monthly?
To get an idea of how payroll regulations differ around the world, here are some interesting examples of payroll laws:
- India’s tax laws allow for multiple different allowances in addition to income. Each of these has different tax implications for both the employer and employee.
- In Hong Kong, employers are expected to notify the tax office at least one month before an employee leaves the country. The company must withhold the last month’s salary and benefits until the employee receives a letter of release confirming tax clearance.
- In the United States, labor laws such as minimum wage or sick leave are different in every state, city, and county.
Data Protection and Employee Privacy
Employers have a moral obligation to protect their employees’ private information, which is why many nations have data privacy laws in place. In European countries, data privacy laws are very strict and rigorous, making compliance a difficult and time-consuming task. Their laws can complicate international relationships as well. The European Union and the United States have an agreement in place called Privacy Shield. It dictates that neither The United States nor The European Union are to follow their own standards, but rather a third, hybrid standard.
International Payroll Administration Made Easy
There are typically three models for payroll outsourcing:
- Fully outsourced or managed services
- Partially outsourced services or multiple vendors
- Access to a platform to perform services in-house
A fully-managed payroll service provides the easiest way to remain compliant in multiple countries. Rather than working with a different vendor in each country, a fully-managed payroll system provides one relationship through which a company supplies all your payroll needs. It also frees up your staff to work on developing your business rather than mastering payroll compliances in each and every country where you want to expand.
If you’re curious about the benefits of a fully managed payroll administration for business, we can help. Contact us to learn about our services and how we can manage compliance for your team members overseas.